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Treasury
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Central Govt. Securities (G-Sec)
- These are risk-free sovereign coupon bearing instruments which are issued by the Govt. of India. Tenor of these instruments can be from very short term (say, of less than one year) to a very long term (say, 20 years). These instruments have fixed coupon paid on specific dates on half-yearly basis. Securities are available in primary and secondary markets. Returns on these instruments are reasonably certain.
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Treasury Bills
- These are discounted Zero-coupon instruments. Maturity periods can be up to 364 days. These are by far the most liquid instruments with relatively attractive returns.
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Commercial Paper (CP)
- CPs are short-term unsecured promissory notes issued by highly rated corporates, Primary dealers (PD), Satellite Dealers (SD) and the Financial Institutions (FI). Tenor of such instruments may vary from a minimum 15 days to 1 year. These instruments are to be necessarily rated by reputed credit rating agencies (with minimum rating of P-2 by CRISIL). Corporates having minimum Net Worth of Rs. 4 Crores and borrowal account classification as 'Standard' by the financing bank/s may issue CPs. Minimum investment for a single investor has to be Rs 5 lacs or multiple thereof.
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Interest Rate Swap (IRS)
- It is an OTC product involving an exchange of interest flows in the samcurrency between two counter parties. These instruments never involve exchange of principal amount. Exchange of interest rates can be of two types - viz. Fixed vs Floating or may be Floating vs Floating. Under the former type, Fixed Rate Payer will have to pay Fixed Swap rate while the Floating Rate Payer will pay only Floating interest rate. Settlement will be on a net basis. Both the legs of interest rates are determined with reference to acceptable benchmark rates.
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Who Can Undertake IRS and What Type of ?
- Banks, PDs and FIs are allowed to enter into Rupee swaps for hedging purpose as well as for market making. Corporate customers can only use this product as a tool for hedging their exposures. All entities are allowed to enter into FCY swaps only for the purpose of hedging their interest rate risk on their underlying assets / liabilities.
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Forward Rate Agreement (FRA)
- A Forward Rate Agreement (FRA) is an agreement whereby an interest rate is fixed now for a period in future for a specified notional principal amount. It is an OTC product and does not involve any exchange of principal amount. The difference between the FRA Rate and the actual Market Rate on the maturity date is paid by one party to the other. If the market rate is higher than the FRA rate, seller pays the buyer whereas in case of market rate being lower than the FRA rate, buyer pays the seller.
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Currency Swaps
- A Currency Swap is defined as exchange of principal and / or interest payments on a loan or asset in one currency for principal and / or interest payments on equivalent loan or asset in another currency at pre-fixed spot / forward rate agreed on the trade date. For example, a customer in India having a loan in USD may enter into a currency swap in order to hedge its USD interest rate risk as well as the USD/INR exchange risk. Under this type of swap, the client may cover either only interest payment or principal repayment or both.
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Options
- An Option offers the buyer / holder the right, but not the obligation, to buy or sell a specified amount of the underlying asset at an agreed rate on or before a specified future date. This arrangement, by natural extension, puts the obligation, not the right, to buy or sell the underlying asset at the pre-determined price at a specified future date. For the right to exercise the option, the buyer pays the seller / writer a premium, which is called the option price.
- Option may either be a Call Option or a Put Option. Under Call Option, the buyer has the right to buy the underlying asset whereas under the Put Option buyer enjoys the right to sell the underlying asset.
- Among the various types of Options are Interest Rate Options (Bonds Option, caps, Floors, Collars etc.) and Currency Options. Interest Rate Option offers the buyer the right, not the obligation, to fix at a point of time in future, either the interest rate on a notional deposit or loan or the price of an instrument. With such instruments buyer is protected against an adverse interest rate movement while retaining the ability to benefit from a favourable movement. A Currency Option gives the buyer the right, not the obligation, to exchange two currencies at a fixed rate at a future point of time. Under this type of option buyer's downside risk is eliminated while retaining the unlimited upside potential.
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Swaptions
- A Swaption is an option over a swap. It offers the buyer the right to enter into a swap at a future date at an agreed rate, but not the obligation on the buyer to do so.
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Treasury Branch
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Mr D.Sarkar, A.G.M
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Tel - 91-22-236 3600 (Direct)
91-22- 236 3636 / 233 9435-39(General)
Fax - 91-22-233 9422
Address
6th Floor, Kalpataru Heritage Building
Nanik Motwani Marg, Fort
Mumbai- 400 021 |
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Funds Desk
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Tel - 91-22-236 3604/3621/3622
Fax - 91-22-233 9433
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G-Sec Desk
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Tel - 91-22-236 3602 / 233 9418/9419/9426/9427
Fax - 91-22-233 9423
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Corporate Bonds Desk
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Tel - 91-22-2369427-27
Fax - 91-22-233 9423
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Equity Desk
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Tel - 91-22- 236 3603 / 233 9454
Fax - 91-22-233 9423
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Forex Desk
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Tel - 91-22-236 3606 / 233 9449 - 53
Fax - 91-22-233 9423
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